Priority Life Care is launching a new fund to accelerate its growth, with a new chief investment officer leading the effort.

The company is spinning up a new $10 million fund to attract and fuel co-investment in senior living acquisitions, according to CEO Sevy Petras. To manage the effort, the Fort Wayne, Indiana-based senior living operator has brought on former Lloyd Jones Chief Investment Officer Dennis Murphy as its first-ever CIO.

The new general partner (GP) co-investment fund of $10 million will give PLC $200 million in total equity when paired with a capital partner in a 95%-5% structure, Murphy said. The new fund is meant to build upon the structure of the company’s foundation as new development remains challenging, according to Petras.

“We’re doing this in a healthy way, it’s well-timed out and we’re ready,” Petras told SHN Monday.

Priority Life Care, which operates 64 senior living communities nationwide, has not raised a fund before to fuel growth, nor has it had a CIO position in the c-suite. But the company is in 2024 ready to start a new venture and chapter, Petras said.

“Bringing somebody on who’s managing the fund, running the fund, driving the fund, who also has that track record, to me, was the winning combination,” she said. “It was important that we brought on someone with experience, expertise and a proven track record.”

With nearly two decades of senior living operations experience, Murphy told SHN he wanted to help highlight PLC’s successful journey from a regional third-party management company to a company of nearly 70 communities in order to garner future investment.

Coming from Lloyd Jones and before that, Benchmark Senior Living, Murphy brings experience courting investor groups that previously hadn’t had large senior living portfolios and institutional investors that are less familiar with the industry.

“It will be interesting for us to start this next chapter,” Murphy said. “There’s a lot of opportunity out there on the ‘buy’ side, and that’s where we’re looking to jump in.”

‘We will start small’

The first fund’s goal is about $10 million. Murphy said the structure would include a 90%-10% or 95%-5% investment structure alongside capital partners in upcoming acquisitions.

Although $10 million is a relatively small sum for a growth fund, Murphy said the plan is to gradually ramp up future funds after the first one is completed.

“The idea is that we could raise the first fund, execute that out quickly, and immediately hop through to the next fund and work out the processing of things so that we can elevate the size of that second fund,” he said. “I think trying to take a big bite out of the apple is a little aggressive, so we will start small.”

By building a vehicle for co-investment alongside existing capital partners, Petras said PLC will gain “more cohesiveness in our contracts” and “traction” that allows the third-party management company to share in some of the value it is creating for its respective senior living ownership groups.

Also, PLC employees will be able to invest in the fund up to a certain threshold to reap future financial benefits for the value they help create in the company’s success as a third-party operator.

The new fund will help Priority access opportunities such as new acquisitions in joint ventures or partnership opportunities with capital partners. Future acquisitions could also come in the form of “strengthening regional density” between existing communities, Petras said.

Petras said her past as a successful investment banker had given her cues that now was a good time to launch a fund to help with growth for the future. That is not only to do with the current investment landscape but also the wall of demand facing the industry in just a few years time.

“We feel that this is the real estate cycle to really invest in, and we don’t know how large the window is going to be,” Petras said. “This is an opportunity to co-invest and be alongside our great capital partners, and having a little skin in the game, it’s a really exciting next phase for us.”

The new fund is a growth milestone for Priority Life Care. A few other senior living operators have grown in similar ways, including Baltimore-based Brightview Senior Living, which is preparing to launch a new fund that has a more than $200 million investment target.

Upward growth trajectory

Priority Life Care has reached this point in its company history through “healthy” alignment with capital and ownership partners that include Ventas (NYSE: VTR).

All the while, the company is reshaping its portfolio of senior living communities for a new generation of customers by using new technology and data. For example, earlier this year, the company launched a new program called Embrace meant to better onboard residents and improve the quality of their services by using electronic data.

“The reason we feel comfortable and confident in building this fund today has everything to do with what we’ve built and spent the time coming out of Covid,” Petras said.

Priority Life Care has been on an upward growth trajectory, culminating in what Petras called a “breakout year” in 2023, with the operator expanding its portfolio by adding over a dozen communities.

Last year, Ventas transitioned management of eight independent living communities in Florida operated previously by Atria and Holiday Retirement.

The company’s growth is not ending there. Later this year, the operator plans to announce a new partnership with a capital partner wherein Priority Life Care will be the designated operator to oversee, turn around and eventually prepare for sale communities that have fallen into receivership.

“It’s a very different situation,” Petras said of helping stabilize struggling senior living communities. “You have to make sure that we’re able to alleviate people’s fears. Our track record is there, and we’ve done it at all different types of communities.”